R.L. Gupta. J.

1. The petitioners, 30 in number, have filed this petition under Article 227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure (Code for short) for quashing the orders of the Central Bureau of investigation (CBI for short) directing the various banks, financial Institutions and Post offices with which the petitioners have their respective accounts, to freeze those accounts. The CBI claims to have exercised such powers under Section 102 of the Code. The brief facts necessary for the disposal of this petition are that petitioners 1 and 4who are brothers have been doing business of the manufacture and sale of phosphate fertilizers in Punjab. Initially they started this business in partnership with four other (not parties to the present petition) under the name and style of M/s Punjab Fertilizers & Pesticide Industries (PFPI for short) with its registered office at Amritsar. The firm continued its business upto 8.6.83 when it was dissolved and business taken over by a Private Limited Company known as the Punjab Phosphates (P) Ltd. (PPPL for short) again with its registered office at Amritsar. Petitioner No. 1 claims to be its Managing Director while petitioner No. 2, a Director. The Union of India, the first respondent introduced a scheme of subsidy to sustain and ensure the healthy development of phosphate industry in the year 1976. To reap the benefit of this scheme, the firm gave the required undertaking regarding the manufacture and sale of phosphate fertilizers. Although a copy of such undertaking is not available with the petitioners containing the material terms and conditions. One of its terms is claimed to be as follows:

We further undertake that if the aforesaid amount is not credited by us in the time limits specified above, we shall pay interest at the rate of 2.5% above the ruling bank rate for working capital loans as prescribed in the Government of India specimen of Undertaking/Agreement or at the rate as fixed from time-to-time. We also undertake and promise to abide by the decisions of the Committee which is final and binding on all matters relating to the determination of the fair price.

3. An intimation regarding the business of the firm having been taken over by the Company is alleged to have sent to the concerned department of the State Government as well as the Union of India with a request to record the change, with the same Undertaking. In 1986, the Company shifted its factory from Amritsar to Bahadur Garh in the State of Haryana under intimation to the Union of India. Factory, however is alleged to be liying closed since the end of 1987. The firm/ Company, claimed amount of subsidy according to their entitlement in respect of the goods actually manufactured and sold from 1980 through May, 1987. Since no sales were carried out thereafter, no claim for any subsidy was prepared either at Amritsar or at Bahadur Garh. The CBI lodged five FIRs during the course of investigation in respect of some transactions against some of the petitioners detailed in para 2.6 of the petition. The substance of one of such FIR No. 11 of 11-11.1988 is as follows:

On a reliable information received by it to the effect that the 1st petitioner during the year 1980, entered into a criminal conspiracy with certain unknown persons and started a firm under the name and style of M/s Punjab Chemicals & Fertilizers Limited with its registered office at Ram Bagh Gate, Opposite Church, Amritsar, Punjab in the same year for manufacturing of Super Phosphate Fertilizer and the same was registered with the department of Industries, Amritsar, Punjab on 10 July, 1980. The name of the said firm was later on changed to PPPL, Amritsar with effect from 5th May, 1983. The factory is alleged to have been located at Nehru Park, Azad Road, Chheharta, Amritsar, Punjab. The firm had an installed capacity of 36,000 metric tonnes and utilized capacity of 15,000 metric tonnes of super phosphate.

As per the policy of the Government of India, any firm producing super phosphate fertilizer was allowed to claim subsidy of Rs. 200 per metric tonne on the production of the unit and Ministry of Petroleum, Chemical and Fertilizers, Government of India, New Delhi vide their circular had prescribed procedure for filing the claims of subsidy by the manufacturing unit and such units were required to file their claims supported by statements showing distribution of the fertilizers and that the Companies were also required to submit certificates signed by the Chartered Accountants of the Company. It was also required that the bills of subsidy claims be submitted through the State Governmentin this case the Government of Punjab, to the officer of the Director, Fertilizer Industries Coordination Committee, New Delhi (DFICC for short).

The prosecution learnt that in furtherance of the said criminal conspiracy, the first petitioner in his capacity as Managing Director of PPPL dishonestly and fraudulently submitted bogus subsidy claims in the office of DFICC from December, 1980 to March, 1983, with bogus certificates through the State Government of Punjab without manufacturing any such fertilizer in his above said factory and in this manner claimed and received a total amount of Rs. 2,64,55,776 on the strength of the bogus certificates of manufacture, sale, etc. of fertilizer from DFICC: The DFICC is alleged to have dishonestly and fraudulently passed amounts against such bogus subsidy claims without verifying the genuineness of the supporting documents/certificates which they were required to do. In December, 1986 the PPPL itself registered with the District Industries Centre, Bahadur Garh, Haryana and showed its factory to be located in village Sankhal of District Rohtak where, in fact, no manufacturing activities have taken place for which subsidy claims were submitted and obtained. The unit did not consume any required quantity of electricity for manufacture of such huge quantity of fertilizer.

The above facts prima facie disclose the commission of offences under Section 120B, IPC read with, 420, 467, 468 and 471, IPC and the case is, therefore, registered and entrusted to Sh. D.K. Choudhary, Dy. SP, CBI, SPE/SIU VIII, New Delhi, for investigation.

4. Petitioners 1 and 4 were arrested on 6. 12.1988. Their residential as well as business premises were raided and all account books, correspondences, household articles, vehicles, bearer bounds, National Saving Certificates, Indra Vikas Patras, Jewellery, cash, licensed weapons, etc. were seized and taken away. Their accounts in various Banks, Post Office, etc. as detailed in para 2.8 are alleged to have been frozen and, operation prohibited by the CBI by writing letters to the aforesaid Banks, etc. On enquiry by the State Bank of Bikaner and Jaipur about the laws under which such directions were issued, CBI clarified by writing to the following effect:

(Page 116)

Kindly refer to your letter dated......you had asked for specific authority vested by the relevant Act to freeze the account of Mr. Prem Kumar Parmar. In this connection, I am to bring to your kind notice that the accused Mr. P.K. Parmar in conspiracy had cheated the Government of India for 1980-87 to the tune of Rs. 2.64 crores. It is the responsibility of Investigation Agency to recover such amounts. I have to bring to your kind notice that there is section in Criminal Procedure Code of India, Section 102 and provision of criminal law amendment of Ordinance, 1944.

At this stage of investigation, we are simply freezing the account of the accused person either in their own name, in the name of their relatives, family members or some benami names and also opening lockers, etc.

Yours faithfully,

Sd/-

(D.K. Choudhary)

5. The grievance of the petitioners is that such directions by the CBI are causing great hardship, irreparable injury as well as damage to their reputation in the society and business community. Even the matured bonds, deposit certificates, etc. lying with Post office, LIC, etc. cannot be encashed, thereby re-resulting in immense financial losses to the petitioners. Further case of the petitioners is that under Section 102 of the Code only such property can be seized which may be alleged to have been stolen or which may be found circumstances which create suspicion of the commission of any offence. In the present case; it is alleged that the situation is quite reverse and, therefore, the power under Section 102 of the Code cannot be exercised. Only movable property capable of being actually seized could be seized under Section 102. Bank accounts and money lying in deposit cannot be deemed to have created suspicion of an offence. There are no circumstances any offence. The petitioners, therefore, seek quashing of the orders/directions issued by the CBI to the banks and other Financial Institutions.

6. Notice of this petition was issued to the respondents. Reply has been tiled on behalf of the CBI. The main grounds appearing in the reply are that petitioners 1 and 4 who were the Directors of M/s PPPL had fabricated documents showing procurement of raw materials from different agencies, manufacture of Fertilizers in their so called factory and sale of the same to fictitious persons. In fact the business of the petitioner was established only on paper in the name of M/s PPPI at Amritsar which was later on changed to M/s PPPL in June, 1983. In the names of these two concerns the petitioners had defrauded the Government of India to the tune of Rs. 3.39 crores approximately. The aforesaid agencies are alleged to be fictitious and no manufacture or sale of any fertilizer as claimed by the petitioner took place from 1980 through 1987. The petitioner in conspiracy with certain unauthorized and unscrupulous officers of the State Industries Department, Amritsar dishonestly and fraudulently got certified some of the claims of earlier period unauthorisedly. In this fraud some officers of DFICC were also involved as they had dishonestly and fraudulently given favourable reports in favour of the said Company. This fact was also a subject matter of the investigation with the CBI. It was wrong on the part of the petitioners to allege that they had any firm or Company located at Amritsar and thereafter at Bahadur Garh in Haryana. It has been found that they had already intimated to various Authorities that they had closed their factory in 1986 itself. The petitioners are alleged even to have forged various documents showing procurement of raw material from various firms and Government agencies whereas in fact no raw marerial had been supplied by such non-existent firms. The CBI also exemplified by stating that several crores of payments were shown to M/s B.K.. Enterprises, Sadhna Enterprises and some Government Undertakings of Madhya Pradesh and Rajasthan by local cheques and in fact the said amounts were also received by the first petitioner by forging the signatures of partners, Directors or representatives of such concerns. Only such articles which appeared to be acquired out of the defrauded amount and connected with the fraud were taken into possession. In most of the Branches of the Banks huge deposits in assumed names were found and the first petitioner himself had forged the signatures of such persons. Even the complete addresses of such depositors are alleged to be not mentioned in such accounts, obviously showing conspiracy of the first petitioner with the respective Branch Managers. Even Benami Lockers were located and their search yielded huge cash, primary gold and un-declared gold and jewelleries. Although some of such lockers were Benami in the name of persons belonging to Rohtak and New Delhi, keys of such lockers were recovered from the residential premises of the first petitioner. Petitioners 5 to 9 are the wife, daughters and son of first petitioner. Except the wife, they were all College and School going children and the first petitioner without their knowledge showed deposits in their names just by forging their signatures himself. It is further stated that the 11th petitioner Kishan Chand is none else than first petitioner himself. Similarly the 27th petitioner B. Beena (Bhola Rani) is none else than Savita Parmar, the 5th petitioner who is the wife of first petitioner. Petitioners 12 and 13 (husband and wife) are actually pauper having no sufficient means or any landed property or business to support them. Both of them have been getting old age pension at the rate of Rs. 50 per month from the District Social Welfare Office, Gurdaspur on the recommendation of the Village Pardhan and District Authorities. But the first petitioner has forged accounts in their name also. The first petitioner is also alleged to have got issued a legal notice to Secretary to Ministry of Home Affairs that the property seized from the first petitioner by the CBI had been gifted to him by the 12th petitioner who actually is a pauper. Thus the first petitioner is alleged to have been the brain behind the fraud and had not appeared before the CBI for investigation in spite of a notice under Section 160, Cr.P.C. The first petitioner, in short, is stated to have no other business, except the cheating of the Government of India fraudulently, obtaining money from it.

7. Arguments have been heard at length on behalf of the parties. The main contention raised on behalf of the petitioner is that aid of Section 102 of the Code could not be taken by the CBI for freezing the bank accounts, etc. belonging to the petitioners because the expression, which may be found under circumstances which create suspicion of any offence will cover only that property, on coming across which suspecion created in the mind of the police officer that an offence has been committed. In other words the argument goes, the seized or attached property by itself should lead to a suspicion that some offence has been committed. To put it in other words, the discovery of the offence should be a sequel to the discovery of that property and not the other way round. In support of this contention, learned Counsel for the petitioners relied upon two authorities of this Court. These are the cases of Ms. Swaran Sabharwal v. Commissioner of Police, 1987 CC Cases 505 and Jagdish Chander and Others v. State and Others, 1990 (1) CC Cases 286. In the first authority, the DB observed that they were not quite sure whether the monies deposited in a bank account could be seized by means of prohibitory order under Section 102 of the Code. However, assuming that a bank account is property within the meaning of that Section, it held, it should be property found under cirucmstances which create the suspicion of the commission of an offence, to justify action under Section 102. In other words, it applies where a police officer comes across certain property in circumstances which create in his mind a suspicion that an offence has been committed. It approved the possession of money in his bank account by a public servant far in excess of his known sources of income, to be actionable under Section 102. In this case the police suspected that some of the proceeds realised by the sale of official secrets had been passed on to the petitioner by her husband. It was held not to be sufficient to attract Section 102 because it could not be that the bank account had been traced or discovered in circumstances which made the police aware of the commission of the offence. In the second case, there was a complaint against the petitioner that a bogus account had been opened by him in Punjab & Sind Bank in the name of a firm representing himself to be its sole proprietor and that he had deposited cheques of huge amounts issued by customers in favour of the said partnership illegally in the said account in conspiracy with others. There was a firm of that name in existence of which the petitioner was only an employee and thus he had opened a bogus account to divert the amounts of cheques to the tune of about Rs. 40 lacs from the accounts of the real partnership. He used to withdraw the amounts later on for acquiring different properties either in his name or in the names of his close family members. This Court held that the deposits made with Ansal Properties for acquiring immovable properties by the petitioner and his close family members had not created any suspicion in the mind of the investigating officer with regard to the commission of any offence and, therefore, the investigating officer had no power to ask Ansal Properties not to transfer the possession of the said properties to the petitioner or his relations. Ultimately this Court observed, All that the police has to show by collecting evidence is that certain sum of money belonging to the complainant has been fraudulently obtained by the petitioner and petitioner had utilised those funds by either acquiring the property in his own name or in the name of his close family members.

8. In a nutshell the principle of law laid down in these authorities is that unless the discovery of a property leads to the suspicion of having been committed, Section 102 cannot be invoked for seizing such properties. Therefore, let us see whether there are any circumstances in the present case to indicate that it is the discovery of the frozen accounts or the seizure of the aforesaid articles that has led the CBI to the suspicion of substantive offences having been committed under Sections 420, 467, 468 and 471 read with Section 120B, IPC. It is the specific allegation of the CBI in the counter affidavit that petitioners 12 and 13 were paupers and living on old age pension and, therefore, the seizure of various properties from the first petitioner alleged to be gifted by them to him prima facie indicates the fraudulent acquisition of such properties by the first petitioner. Similarly the discovery of an account in the name of Kishan Chand, petitioner No. 11 who is none else than the first petitioner himself in itself is an attending circumstance showing the commission of some offence by the petitioner. It defies common sense why the first petitioner should open a fictitious account as Kishan Chand. The allegations in para 2.9 of the petition that petitioners 5 to 30, were not in any way directly or indirectly concerned with the firm or the company or that their deposits and dealings with the financial institutions are independent dealings has been factually found to be incorrect because petitioner No. 11, under a different name is the first petitioner himself. Similarly petitioner No. 27 is the same person as petitioner No. 5 under different name. The very fact that the accounts are found either in the name of non-existent persons or in bogus names and all such accounts being allegedly operated by the first petitioner himself immediately points an accusing finger upon the first petitioner. Similarly the allegations of the CBI that the first petitioner has opened the accounts in the name of his wife, daughters and son by forging their signatures is in itself an attending circumstance which is sufficient to set the machinery of criminal law in motion against the first petitioner.

Besides that, during the investigation the prosecution also come to know that without actually manufacturing phosphate and fertilizers, the first petitioner withdrew as much as Rs. 3.39 crores as subsidy from the Government of India by producing bogus documents. The question, therefore, would arise that if the firm/company started by the petitioner did not in fact manufacture the fertilizer or even procure the raw material, etc. and obtained huge amounts of subsidy from Government of India, where such amounts have been kept/invested by the first petitioner It was only in consequence of such weighty suspicions against the petitioners, who are alleged to be none other than the show pieces of the first petitioner, that amounts of subsidies drawn by him were presumably kept in various bank accounts, lockers and invested in various policies by the first petitioner fraudulently in the name of all other petitioners. So the recovery of such assets links them prima facie with the commission of various offences with which they have been charged by the CBI. The suspicion of CBI is not that the sale proceeds of fertilizers have been held in various accounts by the petitioners, In fact according to CBI, there was no manufacture of fertilizers by PPPL at all and all the documents regarding alleged purchase of raw material for the same and its sale were forged/fabricated solely with the intention of cheating the Government and realize subsidies from it and invest the same in fake names by the first petitioner. The issuance of directions by the CBI to various bankers/financial institutions freezing the accounts of the petitioner is based on a sound footing in the present case. There is no reason to interfere in the steps taken by the CBI.

9. However, before parting, it must be said that the CBI should file the charge-sheet now within the shortest possible period, preferably within a period of months. The petitioners will also co-operate with the further investigations, if any, and they will make themselves available to the Investigating Officer as and when they require.